City produced one of their worst performances of the season at St Mary's with horrific mistakes from Joe Hart and Gareth Barry contributing to Mancini's troubles.
They are already nine points behind rivals Manchester United and that deficit could be extended to 12 if the Red Devils can beat Everton on Sunday.
Asked what the defeat meant for his team's title hopes, Mancini told ESPN: "We have 10%, maybe. I am disappointed with our performance. They deserved to win.
"It'll be very difficult to win the league. I use to be always be optimistic and want to be in this moment, but it's difficult.
"We didn't play well. We conceded a goal that I have never seen in my life. That's it. Now we can do nothing - only say congratulations to Southampton for their performance.
"I think (the players) understand that we played really bad. I think it's the worst game in the last two or three years, maybe.
"I've never seen our team concede goals like this. In the end we made two incredible mistakes. The performance was really poor. We played this game with only two or three players. Three versus 11 was really difficult.
"We're missing Vinny (Kompany) and missing (Matija) Nastasic, and we have some players who are not in form. They played really bad - without strength, without personality. I'm very disappointed in them.
"The players were away on international duty - that's not an excuse, but it is a reason. Some of our players came back on Friday and we played today. This made it difficult."
City were second best for large periods of the game at St Mary's and fell behind in just the seventh minute when Jason Puncheon tucked away the rebound from Rickie Lambert's strike.
The reigning champions then became their own worst enemy as Steve Davis doubled the home side's lead after Hart allowed Lambert's shot to squirm through his hands.
Edin Dzeko reduced the arrears before half-time but a Barry own goal early in the second half secured a first win for Saints' boss Mauricio Pochettino and left Mancini ruing his side's performance.
Asked if it was a poor performance Mancini replied: "No, I don't agree, it was worse than poor."
Mancini also hit out at the midweek international programme and believes a number of his players returned to City's Carrington training base looking jaded.
"All of the players came back Thursday night or Friday and when you have 16 players away on international duty it is difficult to prepare," he said.
"Sometimes the fixtures are ridiculous because they don't think about this but we played a bad game."
City are now an outside bet to retain the Premier League crown they secured in such extraordinary standards on the final day of last season and Mancini - now 5/4 favourite with Sky Bet to be the next top flight manager to leave his job - thinks he knows what is to blame.
"We need to work more. Probably we think that, because we won last year, we are top players but if you want to stay on the top for a long time you have to work always and forget what you did last year."